Stripe Payment Integration — Understanding Key Concepts & Payment Flow | Part 1

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Stripe provides a powerful and flexible payment processing system, but choosing the right integration approach can sometimes feel overwhelming. In this post, we’ll break down the key concepts of Stripe’s payment system, walk through the payment flow diagram, and explain the process of setting up a Stripe account and enabling wallet payments to improve the checkout experience.

Stripe payment processing system is a vast topic which provides every possible solution related to payments. It won’t be possible to cover everything in these two blog posts. So we are limiting our scope to some foundation concepts and an integration guide with a common use-case.

Introduction

In this post, we’ll explore how to identify right payment method for your need with brief overview of the available payment integration options, followed by an in-depth look at the Stripe payment flow for PaymentElement and integration steps with short description.

By the end of this guide, you’ll have a overall understanding of how Stripe’s PaymentElement works and be ready to move on to the implementation phase. In next post, we’ll look into the implementation steps based on flow diagram discussed in this post.

Choosing the Right Stripe Payment Integration

Stripe provides a range of payment integration options designed to meet different business needs, which can sometimes make choosing the right approach feel overwhelming. The first step in the integration process is to define the currencies and countries you want to support.

Once that’s decided, Stripe’s documentation offers detailed tables to help you identify the available payment methods for each region. Based on your requirement, If you’re looking to integrate PaymentElement for a seamless checkout experience, this guide will walk you through everything you need to know.

Payment Integration Options

Let’s look at each payment methods and its use cases.

Payment Links

If you’re looking for a simple way to accept payments without building a separate website or application, Stripe Payment Links can be a great option.

They allow you to create a shareable link that customers can use to make payments or subscribe to services. You can distribute these links across multiple channels, including social media, emails, or directly on your website, making it a flexible and hassle-free payment solution.

Checkout

Checkout provides a low-code payment integration with a customizable payment form. You can embed it directly on your website, redirect users to a Stripe-hosted payment page, or create a tailored checkout experience using Stripe Elements. It supports both one-time payments and subscriptions while offering over 40 local payment methods.

Billing (Subscription)

Billing simplifies subscription management and invoicing. It automates recurring payments, enables custom pricing plans, and manages billing cycles, including trials and renewals — making it ideal for businesses offering subscription-based services.

Invoicing

Invoicing allows you to quickly create and send professional invoices without writing any code. You can generate invoices directly from the Stripe Dashboard or use the Invoicing API to automate payment collection and reconciliation.

Payment Element

The Payment Element is a web-based UI component that supports over 40 payment methods, handles input validation, and manages errors seamlessly. It can be used on its own or combined with other elements in your web app’s frontend for a smooth checkout experience.

Since we will be implementing the custom flow, we will be using the Payment Intents API. It is essential for handling dynamic payment flows. It tracks the entire payment lifecycle — from creation to checkout — and ensures compliance with authentication requirements, such as Strong Customer Authentication (SCA), when necessary.

Key concepts

1. PaymentIntent
   A PaymentIntent represents a single transaction attempt, managing the entire payment lifecycle. It supports authentication, handles required actions, and ensures compliance with Strong Customer Authentication (SCA).

2. PaymentElement
   The PaymentElement is a prebuilt UI component that allows users to enter payment details securely. It supports over 40+ payment methods, dynamically adjusting based on the customer’s location and selected currency.

3. Client Secret
   The client_secret is a unique key generated when creating a PaymentIntent. It is passed securely to the frontend to confirm and finalize the payment using stripe.confirmPayment().

4. Webhook Events
   Stripe sends webhook events to notify the server about important payment updates, such as success, failure, or disputes. This allows the backend to react accordingly, such as updating order status or triggering email notifications.

5. Wallet Payments
   Apple Pay, Google Pay, and Link are digital wallets that allow users to pay with saved cards for a frictionless checkout experience. Enabling these methods can significantly improve conversion rates, especially on mobile devices.

6. Dynamic Payment Method Display
   Stripe automatically shows or hides payment methods based on the user’s location, currency, and device. This ensures that customers only see payment options that are relevant and supported for their region.

7. 3D Secure Authentication (SCA)
   Some transactions require Strong Customer Authentication (SCA) under regulations like PSD2 in Europe. Stripe automatically handles 3D Secure (3DS) authentication by prompting users to verify their identity through OTP or biometric verification.

8. Test and Live Modes
   Stripe provides two environments: 1) Test mode allows developers to simulate transactions using test cards without real charges. 2) Live mode processes actual payments with real customer data.

9. Refunds and Disputes
   Merchants can issue full or partial refunds directly from the Stripe Dashboard or API. If a customer disputes a charge, Stripe provides tools to submit evidence and manage chargebacks effectively.

10. Customer Object
    The Customer Object helps businesses store user details, including saved payment methods, billing information, and past transactions. This is useful for recurring payments and personalized user experiences.

11. Fraud Prevention (Radar)
    Stripe Radar is a built-in fraud detection system that automatically analyzes transactions, detecting fraudulent patterns and reducing chargeback risks.

12. Payment Statuses
    Stripe categorizes payment statuses into:

• Succeeded: Payment was processed successfully.

• Requires Action: Additional authentication (like 3D Secure) is needed.

• Failed: Payment was declined or unsuccessful.

Some of the concepts are not used in our blog posts. However, we still have covered those in this list.

How Custom Payment works?

Now, we have overall idea about the key concepts and payment methods, let’s see how custom payment works with Stripe.

The diagram illustrates the flow of a payment using Stripe’s PaymentIntent API, involving four key participants: Customer, Client, Server, and Stripe.

Here’s a concise explanation of each step in the client-server interaction for creating a PaymentIntent before collecting payment details:

1. Customer Initiates Payment: The customer selects a product and navigates to the payment page.

2. Client Sends Order Details to Server: The client sends product details (e.g., product ID, quantity) to the server via an API request.

3. Server Creates PaymentIntent: The server creates a PaymentIntent using Stripe’s API and returns the `client_secret` to the client.

Payment Intents API is essential for handling dynamic payment flows. It tracks the entire payment lifecycle — from creation to checkout — and ensures compliance with authentication requirements, such as Strong Customer Authentication (SCA), when necessary.

4. Client Displays Payment Form: The client uses Stripe’s PaymentElement to display a form for entering payment details.

5. Customer Finalises Payment: The customer submits payment details, and the client confirms the PaymentIntent using `stripe.confirmPayment()`.

6. Stripe Processes Payment: Stripe processes the payment, handles authentication, and attempts to charge the customer.

7. Server Verifies Payment Status: The server receives a webhook from Stripe with the payment status (e.g., success or failure).

8. Client Updates Customer: The client notifies the customer of the payment status, such as success or retry options.

Setting up Stripe Account and Payment Methods

Create an Account on Stripe

You can first start with creating an account on Stripe. It will ask for Business and back related information. However, all the information is not required in case you are running the Test Mode.

Enable Payment methods

To configure payment methods, visit the Payment Methods section in the Stripe Dashboard. Here, you’ll find a list of available payment options — some, like cards and commonly used methods, are enabled by default.

Even if multiple payment methods are enabled, Stripe intelligently determines the available options based on the customer’s currency, location, and any applicable restrictions. This dynamic offering helps improve conversion rates. For example, Apple Pay won’t appear for customers in India, while GrabPay is only available in Singapore and Malaysia.

Conclusion

In this post, we explored the key concepts of Stripe’s payment system, walked through the payment flow diagram, and covered the steps to create a Stripe account and enable wallet payments for a seamless checkout experience. Understanding these fundamentals is crucial before diving into the actual implementation.

In the next post — Understanding Stripe Payment Integration — A Breakdown of the Implementation | Part 2, we’ll take this knowledge and walk through the step-by-step integration of Stripe’s PaymentElement. Using the flow diagram discussed here, we’ll set up both the client-side and server-side to securely handle payments and complete transactions.